After she sang in the film version of How to Succeed in Business Without Really Trying, she became known for her roles in the films The Comic, opposite Dick Van Dyke, and The Love Bug, opposite Dean Jones. The latter becoming the third-highest-grossing film of 1968 in the United States. That same year, she starred in a special television production of the Jerome Kern–Otto Harbach musical, Roberta, in which she sang "Smoke Gets In Your Eyes", and also peaked at #52 on the Billboard Hot 100 with "L. David Sloane". After the birth of her son, she worked infrequently until accepting a role on Broadway in Seesaw, which netted her a Tony Award nomination in 1974. After her mother's death, she stopped working to spend time with her son.

In 1979, Lee accepted the role of Karen Fairgate on Knots Landing, a spin-off of the immensely popular Dallas. Though slow to start, the series eventually became a ratings hit and became one of the longest-running American primetime dramas ever, lasting for a total of 14 seasons from 1979 - 1993.[1] Due to her long-running tenure, Lee's alter ego is often credited as being the center of the program. Television personality Joan Rivers commented that Lee was, in theory, the "First Lady of Knots Landing" during her guest appearance on The Late Show, which Rivers hosted at the time.[5] The characters of the serial often represented what was happening in society at the time. Lee acknowledged that, saying: "Karen wanted to be a Pollyanna and wasn't ashamed of that. Remember in our society, maybe people don't remember, but remember when we could go over to other people's houses and come in through an open back door? I remember when I was a little girl and my mother and father would have people over and they'd walk into an unlocked door in our house."[6] Lee was the only performer to appear in all of the show's 344 episodes.

Although Lee was enjoying a successful career on television, her marriage to actor James Farentino was failing. Farentino and she separated around the same time Lee's onscreen husband, Don Murray, left the show. Lee thus played a single mother on Knots Landing at the same time she was becoming one in real life. Lee revealed that when her character took off her wedding ring in a 1982 episode, she was taking off her real wedding band.

During the fall of 1982, her character met M. Patrick "Mack" MacKenzie (Kevin Dobson), who became her screen husband the following year. They would continue working together until the end of the series. Lee won the Soap Opera Digest Award for Best Lead Actress (Primetime) three times, and was also nominated for an Emmy in 1982 for "Outstanding Lead Actress in a Drama Series".[7] In 1983, the writers/producers of Knots Landing urged her to do a storyline based on prescription drug dependency which became one of her most prominent storylines. Six years later, Lee directed her first of several episodes of the series. In 1991, Knots Landing reached a milestone with its 300th episode. During the same season, Lee filmed her favorite scene from the series, known as the "Pollyanna Speech" among fans. In this scene, for which Lee had much input, Karen reacts strongly against all of the social problems of 1990s society and explains how she does not want to be a Pollyanna and see the world through rose-colored glasses, but rather wanted the world to be rose-colored.

As Knots Landing moved into the 1990s, its popularity began to wane, although it had outlived all of its contemporaries. The big budget that the series once had was trimmed to the extent that, in the final season, the higher paid cast members were asked to appear in only 15 of the season's 19 episodes as the production company could not afford to pay them. However, Lee insisted on appearing in all 19 episodes that season, doing her extra four episodes for "union scale" pay.

In 1963, Lee met actor James Farentino on the set of the play, How to Succeed in Business Without Really Trying, and in 1966, they were married. Their son, David Farentino, was born July 6, 1969. Lee and Farentino divorced in 1983. She married producer and writer Fred Rappaport in 1987.